General Query about House and Bankruptcy

seven-day-weekend

Hi, just read a question on this forum, someone enquiring whether they would lose their house if they went bankrupt. The questioner's house is a mortgaged house.

My question is, what would happen if you had 100% equity in the house?

Just a general question so that I understand, I'm not going bankrupt.

mattannar

If the house has a mortgage on it, how can it have 100% equity?

seven-day-weekend

mattannar wrote: »

If the house has a mortgage on it, how can it have 100% equity?

I am asking about a house that doesn't have a mortgage. The original questioner's house had a mortgage, but my question is about a house without one.

alastairq

Then the OR would seek to realise the Bankrupt's share of the equity in that asset.

That could take the form of another person buying the OR's interest.

[The OR can't take any asset not owned by the the BR]

Or, failing that, the property can be sold to realise the OR's interest. [Any other party with a shared interest will receive monies due]

Whatever monies are left over, after all unsecured debts are met, and costs paid.... revert to the BAnkrupt.

seven-day-weekend

So basically the bankrupt person could lose their home (assuming it is in their name)?

I suppose thinking about it then it is fair enough as it is an asset. Seems drastic though.

Thanks for your reply.

alastairq

seven-day-weekend wrote: »

So basically the bankrupt person could lose their home (assuming it is in their name)?

I suppose thinking about it then it is fair enough as it is an asset. Seems drastic though.

Thanks for your reply.

No..not in basic terms. Because Bankruptcy isn't ever that straightforward.

Everything, to start with, depends on the Bankrupt's share of the equity in the property.

If 100% [ie, no-one co-habiting, etc]....then the value of the asset must be realised. However....only that amount which is needed to meet the demands of the bankruptcy estate is used..the balance of the value realized is returned to the Bankrupt.


However....if the Bankrupt shares the equity with another person , then the OR will only be looking for the Bankrupt's share.......which doesn't automatically mean the property would have to be sold.

However, a sale of the property still isn't automatic.

Especially if young family members live in the property.

It may be possible to persuade the IS to simply place a Charge on the property?

Much will depend on the amount of Unsecured Debt involved.

[for example, depending on the level of Debt, can a Mortgage be acquired on the property?]